NAB Morning Call

Monday 18th May 2020

The US President has said the US needs to get back to work, vaccine or not. He’s also announced the blocking of microchip supplies to Huawei, with threats of retaliation from China. NAB’s Rodrigo Catril says the market response to news of the trade war was very limited – COVID-19 is a far bigger concern. Retail data from China on Friday was unwelcome news for those hoping for a V-shaped recovery. Whilst in the UK the pound has struggled on Brexit talks and, over the weekend, the BoE’s chief economist suggesting negative interest rates are on the table.

Friday 15th May 2020

The US and Australia have both reported dour job numbers, although markets were braced to expect it. Phil Dobbie talks to NAB’s David de Garis about the calls for more fiscal support, most recently from the Fed’s Neel Kashkari. New Zealand isn’t holding back on stimulus, announcing … an extra $50 billion in spending. US China relations worsened slightly, after President Trump said he could “cut off the whole relationship”. And later today we’ll get more evidence of whether (or not) China is witnessing a V-shaped recovery, with industrial production numbers for April.

Thursday 14th May 2020

The Fed’s Governor Jerome Powell took a very sombre tone about the response to the COVI-19 crisis, highlighting the need for more fiscal stimulus, whilst denouncing the likelihood of negative interest rates. As NAB’s Gavin Friend says, the markets didn’t entirely concur, whilst in New Zealand there was a swift response when the RBNZ didn’t denounce the prospect of rates going below zero. Today the focus in on job numbers, for Australia and the US.

Wednesday 13th May 2020

There’s been a swift reversal in sentiment overnight, with White House COVID-19 Task Force advisor Anthony Fauci suggesting an early lockdown will increase infection rates in the US. NAB’s Rodrigo Catril talks to Phil Dobbie about the market response, which has seen the US dollar lose ground, but trade uncertainty with China means the Australian dollar hasn’t been a been a beneficiary in that fall. The pound is also feeling unloved, with death rates still high and concerns over how the government has managed the situation. Today, the RBNZ meets, whilst Australian consumer confidence numbers will be of some interest.

Tuesday 12th May 2020

When we’ve had positive risk sentiment in the past we’ve tended to see a stronger Aussie dollar, but that’s not the case today. NAB’s Ray Attrill suggests the steeper US yield curve is strengthening the US dollar, which has weakened the Aussie. The optimism in markets continues to be around the lifting of lockdowns around the world, and hopes that more countries can bounce back as quickly as China. The NAB business survey and US small business survey will show the extent of that optimism. And oil, down today, even as Saudi Arabia announces further cuts. Go figure.

Monday 11th May 2020

The non-farm payrolls data on Friday showed 20.5 million new job losses in one month in the US and yet equities rose. NAB’s Tapas Strickland explains how investors are looking to the recovery, hoping that extra activity by central backs will help economies get back on track, sooner rather than later. He says activity data from China is vital for understanding how quickly the bounce back could happen. US-China trade talks will garner some attention this week, along with the emerging unease between China and Australia. And Brexit talks resume today – just like in the olden days.

Friday 8th May 2020

Future contracts for Fed funds turned negative overnight for the first time. NAB’s Gavin Friend explains what’s happening. Is the Fed expected to move to negative interest rates soon? The Bank of England didn’t budge on their stimulus activity, but could well next time. Meanwhile they’ve outlined various scenarios for the UK economy, one seeing a contraction of 14% this year, the most since 1706. Today we’ll see the scenarios envisaged by the RBA. And equity markets seem buoyed again by the hope that the economy will bounce back, helped by China’s balance of trade figures yesterday. Plus, of course, some sectors are benefiting from the lockdown.

Thursday 7th May 2020

Two questions remain over the COVID-19 crisis: when is it safe to lift lockdowns, and what will the debt-impact be on the economy? Bond yields rose in the US today as focus turned to the sheer size of debt issuance coming from the Fed, whilst a European Commission report highlighted the variance in the impact between the north and the south of Europe. Phil Dobbie talks To NAB’s David de Garis about the speed of the recovery around the world – the gap demonstrated today, perhaps, by Australian trade data, unemployment numbers for the US overnight and forecasts from the Bank of England.

Wednesday 6th May 2020

The Euro and Italian bonds took a hit overnight with German judges challenging the ECB on its QE activity. NAB’s Tapas Strickland says it won’t interrupt the bank’s current bond buying, including the pandemic emergency purchase program, and would not over-rule any decision from the European Court of Justice. It does demonstrate, again, the complexity of the European experiment. Elsewhere, optimism abounds around a return to work, pushing equities up in the US and Europe, and helping a resurgence in oil. This has been helped by the news that Pfizer and BioNTech might have a vaccine ready by September if their trials in the US are successful. Did you notice the word IF in that sentence?

Tuesday 5th May 2020

US equities have managed to clamber out of negative territory this morning but, as Phil Dobbie discusses with NAB’s Rodrigo Catril, airline stocks have taken a heavy hit after Warren Buffet’s decision to bail out at the weekend. Tensions between the US and China have added to the uncertainty, but it’s European stocks showing the biggest falls. This, in part, reflects the importance of a court ruling in Germany tonight, over the ECB’s QE program. It’s expected the court will throw out the challenge, but if it rules in favour, it calls into question the ECB’s massive recovery program. Also today, construction data and jobless numbers for Australia, plus the RBA meets.